Geert Hofstedes Uncertainty Avoidance (UAI) Model for Global Business Success: Is it Brilliance or Folly?

“Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster.” ~ Prof. Geert Hofstede

Recent trends such as, the globalization of business, increased diversity in the workforce, and increasing international alliances and mergers, highlight the need to examine business practices within an international context. Researchers caution against unquestioning adoption, dissemination, and application of Western management theories through out the world.

Cultural differences in a work place go deeper than an appreciation of different foods and a preference for different clothing: Western cultures shake hands. Cubans kiss. Some cultures hug when greeting one another. Many bow and bow differently. Japanese bow from the waist; the deeper the bow, the greater the respect.Thais bow with their hands chest high, palms together. Taiwanese are more likely to nod than bow. Dressing, eating and greeting, however, only scratch the surface of cultural differences.

In a landmark study, Prof. Geert Hofstede examined how values in the workplace are influenced by culture. He authored several books including Culture’s Consequences and Cultures and Organizations: Software of the Mind, co-authored with his son Gert Jan Hofstede. Geert’s model, when introduced in 1980, came at a time when cultural differences between societies had become increasingly relevant for both economic and political reasons. Hofstede’s model identifies four primary ‘dimensions’ to assist in differentiating cultures, and they are:

1. Power Distance Index (PDI) focuses on the degree of equality, or inequality, between people in the country’s society. A ‘high Power Distance Index’ indicates that inequalities of power and wealth have been allowed to grow within the society. A ‘low Power Distance Index’ indicates the society de-emphasizes the differences between citizen’s power and wealth. The top countries for ‘high power distance ratio (PDI)’ are: Malaysia, Guatemala, Panama, Philippines, Mexico. The lowest ranked countries for ‘power distance ratio (PDI)’ are: Austria, Israel, Denmark, New Zealand, Ireland.

2. Individualism (IDV) focuses on the degree to which the society reinforces individual or collective, achievement and interpersonal relationships. A ‘high Individualism’ ranking indicates that individuality and individual rights are paramount within the society. A ‘low Individualism‘ ranking typifies societies of a more collectivist nature with close ties between individuals. The highest ranked countries for Individualism ratio are: United States, Australia, United Kingdom, Netherlands, New Zealand. The lowest ranked countries for Individualism ratio are: Guatemala, Ecuador, Panama, Venezuela, Colombia.

3. Masculinity (MAS) focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control and power. A ‘high Masculinity’ ranking indicates the country experiences a high degree of gender differentiation. A ‘low Masculinity’ ranking indicates the country has a low level of differentiation and discrimination between genders. The highest ranked countries for Masculinity ratio are: Japan, Hungary, Austria, Venezuela, Italy. The lowest ranked countries for Masculinity ratio are: Sweden, Norway, Netherlands, Denmark, Costa Rica.

4. Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and ambiguity within the society – i.e. unstructured situations. ‘High Uncertainty Avoidance‘ ranking indicates the country has a low tolerance for uncertainty and ambiguity. ‘Low Uncertainty Avoidance’ ranking indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions. The highest ranked countries for ‘uncertainty avoidance’ ratio are: Greece, Portugal, Guatemala, Uruguay, Belgium. The lowest ranked countries for ‘uncertainty avoidance’ ratio are: Singapore, Jamaica, Denmark, Sweden, Hong Kong.

Geert Hofstede added a fifth (5th) dimension after conducting an additional international study using a survey instrument developed with Chinese employees and managers. Hofstede described that dimension as a culture’s ‘Long-Term Orientation’.

5. Long-Term Orientation (LTO) focuses on the degree the society embraces, or does not embrace, long-term devotion to traditional, forward thinking values. ‘High Long-Term Orientation’ ranking indicates the country prescribes to the values of long-term commitments and respect for tradition. ‘Low Long-Term Orientation’ ranking indicates the country does not reinforce the concept of long-term, traditional orientation. In this culture, change can occur more rapidly as long-term traditions and commitments do not become impediments to change.

(“In Hofstede’s view, the western culture is short-term oriented while the Chinese culture is long-term oriented. (…) The West has used the capacity to love as the symbolic basis for social relationships; the Chinese people use the capacity to work, because the Chinese people care about mutual aid and reciprocity.”)

In the article “Understanding Hofstede’s Five Cultural Dimensions and Applying them to Your Business”by Michelle Cramer writes: Geert Hofstede developed a way to analyze a society’s culture based upon five cultural dimensions. Many organizations and businesses later applied this analysis to their companies in order to determine where they stood as a whole, and what needed to happen in order to change unfavorable results.

As you look at the elements of the ‘Five Cultural Dimensions’ created by Geert Hofstede, it’s important to keep in mind that the results only pertain to a culture or group as a whole, not to individuals within that culture. Thus, you should only apply this analysis to your business as a whole, and not let the results reflect upon any employee…

‘Uncertainty avoidance’ is one of the five intercultural dimensions developed by Hofstede. In essence this cultural dimension measures a country or culture’s preference for strict laws and regulations over ambiguity and risk. According the Hofstede’s findings, Greece is the most risk-averse culture while Singapore the least. Generally speaking Protestant countries and those with Chinese influences score low. Catholic, Buddhist and Arabic speaking countries tend to score high in ‘uncertainty avoidance’.

But, how does this manifest in a culture or country? Some of the common traits found in countries that score high on the uncertainty avoidance scale (UAI) are: Usually countries/cultures with a long history; The population is not multicultural, i.e. homogenous; Risks, even calculated, are avoided in business; New ideas and concepts are more difficult to introduce.

Some of the common traits found in countries that score low on the ‘uncertainty avoidance scale (UAI)’ are: Usually a country with a young history, i.e. USA; The population is much more diverse due to waves of immigration; Risk is embraced as part of business; innovation and pushing boundaries is encouraged.

If you are working or doing business in a country with ‘higheruncertainty avoidance score (UAI)’ than yourself then: Don’t expect new ideas, ways or methods to be readily embraced. You need to allow time to help develop an understanding of an initiative to help foster confidence in it; Involve local counterparts in projects to allow them a sense of understanding.

This then decreases the element of the unknown; Be prepared for a more fatalistic world view. People may not feel fully in control and are therefore possibly less willing to make decisions with some element of the unknown; Remember that due to a need to negate uncertainty, proposals and presentations will be examined in fine detail. Back up everything with facts and statistics.

If you are working or doing business in a country with ‘lower uncertainty avoidance score (UAI)’ than yourself then: Try to be more flexible or open in your approach to new ideas than you may be used to; Be prepared to push through agreed plans quickly as they would be expected to be realized as soon as possible; Allow employees the autonomy and space to execute their tasks on their own; only guidelines and resources will be expected of you; Recognize that nationals in the country may take a different approach to life and see their destiny in their own hands.

Kevin Dwyer writes: Cultural differences have an impact on how we conduct our business. They determine, in part, how easily we can build rapport. In my experience, well over half the battle in building rapport across very different cultures is understanding. For example: Different cultures choose different approaches for a dilemma, such as: Diagnosis of a problem and suggested solution.

These two dimensions, ‘Power Distance and Uncertainty Avoidance’, affect our thinking about organizations. Taking these two dimensions together reveals differences in the implicit model that people from different cultures may have about organizational structure and functioning. Organizing demands the answers to two important questions:

Who has the power to decide what?

What rules or procedures will be followed to attain the desired ends?

The answer to the first question is influenced by indigenous cultural norms of ‘power distance’; the answer to the second question by the cultural norms about ‘uncertainty avoidance’. Taken together these two dimensions reveal a remarkable contrast in a society’s acceptance and conception of an organization and the mechanisms that are employed in controlling and co-ordinating activities within it.

For example, in Germany there is reasonable ‘high uncertainty avoidance’ (65) compared to countries as Singapore(8) and neighboring country Denmark (23). Germans are not to keen on uncertainty, by planning everything carefully they try to avoid the uncertainty. In Germany there is a society that relies on rules, laws and regulations. Germany wants to reduce its risks to the minimum and proceed with changes step-by-step. The U. S. scores 46 compared to the 65 of German culture. ‘Uncertainty avoidance’ in the U.S. is relatively low, which can clearly be viewed through the national cultures.

In the article “Executive Commentary: The Impact of Hofstede’s Work on Business Practices”by John W. Bing sites a few examples, such as:

1. Models of Leadership: Providing an understanding of how leadership practices and expectations may differ internationally and how to express the specific leadership practices of organizations in ways that can be understood by various constituencies. “Good” leadership behavior in one culture may be considered rather poor behavior in another.

2. Management Practices: Offering an understanding of the influence of culture on management practices worldwide within and between companies. Both compensation and benefit practices differ considerably across cultures, often on the individual-group dimension. What may be considered appropriate CEO compensation in a high individualistic culture may be considered larceny in a high group-oriented country.

3. Communicating Across Geographic and Institutional Boundaries: Understanding the role of leadership in translating and communicating both within and between local subsidiaries and between the corporate entity and its local subsidiaries. The study of dimensional differences can help global leaders both create and interpret policies at both local and corporate levels with a higher chance of success across company and geographic boundaries.

4. Global Teams: Learning how to lead global teams and measure obstacles and progress. Team members can discuss how their preferences influence their work on the team and how each person can help reach the team’s objectives. They can discuss why some members of teams would prefer for the team to perform like a leaderless jazz band (high individuality) and others like an orchestra with a conductor (group orientation and high power distance). Differences in cultural preferences can be leveraged to improve creativity and work effectiveness.

5. Development of Global Competencies: Understanding how cultural dimensions interact with global competencies. The dimensions mediate how competencies are both interpreted and rewarded. Helping senior leaders identify cultural and related barriers and bridges to communications and trust-building within new entities and provide solutions to speed these business transactions.

According to a KPMG study, “83% of all mergers and acquisitions (M&A’s) failed to produce any benefit for the shareholders, and over half actually destroyed value.”Cultural preferences have been identified as often overlooked barrier to effective implementation of mergers, acquisitions. The dimensions can be used to anticipate and reduce the culture clashes. In addition, merging companies’ disparate practices must also be aligned.

If you are aiming to expand or set-up a business in a new country, culture is a very important aspect to consider in your feasibility study. Here are a few examples of marketing blunders:

A toothpaste selling company tried to sell its product in Southeast Asia by emphasizing that it “whitens your teeth”. Their strategy failed because they found out that the local natives chew betel nuts to blacken their teeth which they find attractive.

A perfume company advertised a pastoral scene with a man and his dog. It failed in Islamic countries as dogs are considered as unclean there.

A motor company tried to market its new car, the Matador, based on the image of bravery and strength. However, in Puerto Rico the name meant “killer” and was not popular on the perilous roads in the country.

All these issues aroused because of low research made about the culture of the other countries. Poor cross cultural awareness has many consequences; some are serious while others are humorous. It is primordial that in the global economy, cross cultural awareness is seen a necessary investment to avoid such blunders.

You should be aware of the degree of equality between people in a particular society, whether individualism prevails over collectivism, whether the society is a male dominated one, whether people have low level of tolerance for uncertainty, whether there is willingness to commit in long-term business among many others.

Using this model as a benchmark, marketers can now fully develop their market entry method, their objectives, mission and vision, their marketing and communication strategies, the proper use of language and visuals in advertising, the way to approach potential clients and partners among many others…

“Culture is a little like dropping an Alka-Seltzer into a glass- you don’t see it, but somehow it does something”– Hans Magnus Enzensberger

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